RIO DE JANEIRO—Brazilian entrepreneur Eike Batista, on the wrong end of one of the biggest wealth collapses in history, is lashing out at people he blames for his undoing.
Reuters 'I am the biggest loser in this,' says Brazilian businessman Eike Batista. In an interview—his first since his empire crumbled earlier this year—the 56-year-old former powerboat racer said the oil executives he used to call his "Dream Team" misled him.
He also said his investors bailed out too quickly. And he blamed just plain bad luck. "I am the biggest loser in this. I tried to create wealth for all of us.
That was the reason we raised all the money—to create wealth and share it," said Mr. Batista late Friday in his office overlooking one of Rio de Janeiro's bays.
"I believed in it. Living in a country that has these gigantic oil discoveries, why shouldn't I have been blessed with one?" In the short space of a year, the flamboyant businessman went from being ranked the world's seventh richest man, worth some $30 billion, to being off the billionaire's list in one of the swiftest and largest financial implosions in modern times.
Shares of his six public companies plunged, some more than 90% this year, after his oil firm failed to produce much of the 10 billion barrels he had said were within its reach.
From New York to Rio, holders of around $10 billion of debt issued by Batista companies are now scrambling to try to recoup their money in one of the biggest debt restructurings under way globally. Mr. Batista's decline has become a parable for the excesses of the emerging-market boom that lifted Brazil in the past decade.
During a five-year run, blue-chip investors such as BlackRock Inc., Pacific Investment Management Co. and the Abu Dhabi sovereign-wealth fund bought his array of startups. He gave all his companies three-letter names ending in X, to represent multiplication of wealth. Mr. Batista liked to call these assets "idiot proof."
But years after he took them to market, none has turned a profit. As he spoke Friday, the lights on one of his offshore oil platforms twinkled in the bay. Bondholders hope it is intact and can be sold to pay them back.
Reuters Eike Batista planned for his oil company to buy its rigs from his shipbuilding company OSX, seen above in Rio de Janeiro in 2011. Mr. Batista said he could raise $1 billion selling his oil rigs. But he gave few details of the array of restructuring talks going on from New York to Rio.
In New York, holders of $3.6 billion of bonds in his oil company OGX—now valued at pennies on the dollar—are trying to force him to put $1 billion more into the company.
Meantime, Mr. Batista is asking bondholders to put their money into the company. He says they will likely take control of it. If they can't agree, the case could end up in Brazilian courts.
While the prospects for OGX look grim, analysts say, Mr. Batista has succeeded in selling stakes in some of his other X companies in a flurry of deals in recent weeks. In August, EIG Management Co. agreed to invest up to $560 million for a controlling stake in LLX.
In July, Mr. Batista sold control of his electric-power-generation company MPX Energia SA to German utility E.ON. His MMX mining company sold a port in Southern Brazil to Trafigura Beheer BV and Mubadala Development Co. in a $400 million deal.
The Brazilian says the deals suggest parts of his conglomerate are healthier than investors believe.
"Remember how I used to say 'idiot-proof' assets? Listen, these things are somehow idiot proof because you can sell them even in a crazy market."
Mr. Batista provided investors with a way to play the dramatic story of Brazil's economic rise at a time when they sought alternatives to the slowing U.S. and European economies.
The resource-rich nation had one of the world's best performing stock markets for several years running, and in 2008 it appeared to shrug off the global financial crisis after the collapse of Lehman Brothers.
As if that weren't enough, Brazil found the biggest deep-water oil fields ever just as oil prices were soaring. Starting in 2006, Mr. Batista sold shares in a string of interlinking commodities companies he had set up to profit from Brazil's promise.
His OGX oil firm would help find Brazil's new oil bounty. And it would buy its oil rigs from OSX, a ship builder he took public in 2010. OSX would build its ships at a port facility bigger than Manhattan to be built by LLX.
And mining-company MMX would ship raw materials from the port. When OGX went public in 2008 it raised over $4 billion—more than Google Inc.'s high-profile share sale attracted a few years earlier.
"Brazil was everyone's favorite market. It is easy to throw stones now, but nobody put a gun to anyone's head and said you have to buy," said Will Landers, who runs the Latin American equity funds at Black Rock, the world's biggest portfolio manager.
Mr. Landers said the company sold much of its Batista holdings. But it is still among the biggest shareholders in OGX.
Mr. Batista said he recognizes now that rising oil prices were a bubble that helped his climb, but he added that he still believes optimism for Brazil's resource-rich economy wasn't overdone.
"Brazil is this giant that is supposed to fall into a hole and never does because it's always bigger than the hole," he said. Sitting for an interview in a slim gray pinstripe suit and gray T-shirt, Mr. Batista's hair was mussed and his eyes bleary.
He said he was tired from the intense rounds of deal making. His appearance was far more subdued than the flamboyant image he cultivated during his rise, when he was a required stop on any investment trip to Brazil.
At his peak, Mr. Batista wasn't shy about showing off his wealth. He parked his flashy Mercedes SLR McClaren in his living room. In the 1990s he had attained some fame by marrying Luma de Oliveira, a Playboy model and popular Brazilian sex symbol.
He let it be known he had had cosmetic surgery on his eyes and a painful round of hair implants. By 2010, Mr. Batista was Brazil's richest man and famous in his own right.
When Rio de Janeiro officials flew to Europe to clinch the city's bid to host the 2016 Olympics, they flew on one of his planes. None of his companies incited more excitement than OGX.
To found it, Mr. Batista assembled top executives from state-controlled oil giant Petroleos Brasileiros SA who investors believed were well suited to select prime oil fields for production. Mr. Batista took to introducing one, former Petrobras exploration chief Paulo Mendonça, as "Dr. Oil."
Mr. Batista now says these executives were expert at finding oil but not producing it. And they weren't familiar with the geology OGX was working with. Worse, he said, they fed him glowing progress reports to persuade him to pay big bonus checks.
"The motivation wasn't necessarily to bring me the truth," he said. Several former OGX oil executives declined to comment for this article. Mr. Mendonça couldn't be reached, and his friends say he has sought to stay out of touch following the company's collapse.
Mr. Batista said he is comfortable passing on the blame to his managers because, as a mining executive, he didn't have the knowledge of the oil industry to question their reports.
"I am the owner of a big group. I alone can't do it. Let's say I can be the owner of a hospital, but without 50 surgeons in their areas you are nothing. I don't have the special knowledge. You wouldn't ask the owner of a hospital to operate on your kidney," he added.
There were some signs of trouble. Before OGX's IPO, investment-bank Merrill Lynch pulled out of the deal after its analyst, Frank McGann, said the expectations were too high. Later in 2010, OGX sought to sell some of its fields to established oil companies that said the prices were too high. Mr. Batista is a believer in luck and superstition, and his lucky number is 63.
During his rise, the fact that he ended all of his oil-field bids with 63 added to his air of charmed success.But his luck seemed to turn in 2012. He was riding high early in the year when he got a $2 billion loan from Abu Dhabi and a $300 million equity investment from General Electric Co.
Then, in March, his son ran over a day laborer, killing him with the Mercedes Mr. Batista kept in his living room. Mr. Batista took to his Twitter account to criticize the man for putting his son's life at risk.
But the Brazilian press was highly critical of Mr. Batista's response and what it suggested about economic inequality in Brazil. Then in June, OGX announced that the wells it had drilled would produce far less than was estimated, prompting a cascade of declining share prices.
"If you look at my astrological map, this period wasn't favorable for me," Mr. Batista said during the interview, pausing and staring into space for a moment.
"The good period? It has already started, literally this month," he added. Mr. Batista predicts he will make a comeback.
Bankers and private-equity investors who have met with him in recent days say he talks incessantly about the story of U.S. entrepreneur Elon Musk, the founder of PayPal, the commercial space travel company SpaceX, and the electric car company Tesla Motors.
During the interview, Mr. Batista brought up Mr. Musk several times as an entrepreneur who was doubted by investors only to prove them wrong.
Mr. Batista believes that he will experience the same triumph when the port, mining and other parts of his conglomerate that he says are healthy become profitable.
"Elon Musk said starting a business is like eating glass," Mr. Batista said. "I am eating glass." Loretta Chao in São Paulo contributed to this article.
yahoo.com
Reuters 'I am the biggest loser in this,' says Brazilian businessman Eike Batista. In an interview—his first since his empire crumbled earlier this year—the 56-year-old former powerboat racer said the oil executives he used to call his "Dream Team" misled him.
He also said his investors bailed out too quickly. And he blamed just plain bad luck. "I am the biggest loser in this. I tried to create wealth for all of us.
That was the reason we raised all the money—to create wealth and share it," said Mr. Batista late Friday in his office overlooking one of Rio de Janeiro's bays.
"I believed in it. Living in a country that has these gigantic oil discoveries, why shouldn't I have been blessed with one?" In the short space of a year, the flamboyant businessman went from being ranked the world's seventh richest man, worth some $30 billion, to being off the billionaire's list in one of the swiftest and largest financial implosions in modern times.
Shares of his six public companies plunged, some more than 90% this year, after his oil firm failed to produce much of the 10 billion barrels he had said were within its reach.
From New York to Rio, holders of around $10 billion of debt issued by Batista companies are now scrambling to try to recoup their money in one of the biggest debt restructurings under way globally. Mr. Batista's decline has become a parable for the excesses of the emerging-market boom that lifted Brazil in the past decade.
During a five-year run, blue-chip investors such as BlackRock Inc., Pacific Investment Management Co. and the Abu Dhabi sovereign-wealth fund bought his array of startups. He gave all his companies three-letter names ending in X, to represent multiplication of wealth. Mr. Batista liked to call these assets "idiot proof."
But years after he took them to market, none has turned a profit. As he spoke Friday, the lights on one of his offshore oil platforms twinkled in the bay. Bondholders hope it is intact and can be sold to pay them back.
Reuters Eike Batista planned for his oil company to buy its rigs from his shipbuilding company OSX, seen above in Rio de Janeiro in 2011. Mr. Batista said he could raise $1 billion selling his oil rigs. But he gave few details of the array of restructuring talks going on from New York to Rio.
In New York, holders of $3.6 billion of bonds in his oil company OGX—now valued at pennies on the dollar—are trying to force him to put $1 billion more into the company.
Meantime, Mr. Batista is asking bondholders to put their money into the company. He says they will likely take control of it. If they can't agree, the case could end up in Brazilian courts.
While the prospects for OGX look grim, analysts say, Mr. Batista has succeeded in selling stakes in some of his other X companies in a flurry of deals in recent weeks. In August, EIG Management Co. agreed to invest up to $560 million for a controlling stake in LLX.
In July, Mr. Batista sold control of his electric-power-generation company MPX Energia SA to German utility E.ON. His MMX mining company sold a port in Southern Brazil to Trafigura Beheer BV and Mubadala Development Co. in a $400 million deal.
The Brazilian says the deals suggest parts of his conglomerate are healthier than investors believe.
"Remember how I used to say 'idiot-proof' assets? Listen, these things are somehow idiot proof because you can sell them even in a crazy market."
Mr. Batista provided investors with a way to play the dramatic story of Brazil's economic rise at a time when they sought alternatives to the slowing U.S. and European economies.
The resource-rich nation had one of the world's best performing stock markets for several years running, and in 2008 it appeared to shrug off the global financial crisis after the collapse of Lehman Brothers.
As if that weren't enough, Brazil found the biggest deep-water oil fields ever just as oil prices were soaring. Starting in 2006, Mr. Batista sold shares in a string of interlinking commodities companies he had set up to profit from Brazil's promise.
His OGX oil firm would help find Brazil's new oil bounty. And it would buy its oil rigs from OSX, a ship builder he took public in 2010. OSX would build its ships at a port facility bigger than Manhattan to be built by LLX.
And mining-company MMX would ship raw materials from the port. When OGX went public in 2008 it raised over $4 billion—more than Google Inc.'s high-profile share sale attracted a few years earlier.
"Brazil was everyone's favorite market. It is easy to throw stones now, but nobody put a gun to anyone's head and said you have to buy," said Will Landers, who runs the Latin American equity funds at Black Rock, the world's biggest portfolio manager.
Mr. Landers said the company sold much of its Batista holdings. But it is still among the biggest shareholders in OGX.
Mr. Batista said he recognizes now that rising oil prices were a bubble that helped his climb, but he added that he still believes optimism for Brazil's resource-rich economy wasn't overdone.
"Brazil is this giant that is supposed to fall into a hole and never does because it's always bigger than the hole," he said. Sitting for an interview in a slim gray pinstripe suit and gray T-shirt, Mr. Batista's hair was mussed and his eyes bleary.
He said he was tired from the intense rounds of deal making. His appearance was far more subdued than the flamboyant image he cultivated during his rise, when he was a required stop on any investment trip to Brazil.
At his peak, Mr. Batista wasn't shy about showing off his wealth. He parked his flashy Mercedes SLR McClaren in his living room. In the 1990s he had attained some fame by marrying Luma de Oliveira, a Playboy model and popular Brazilian sex symbol.
He let it be known he had had cosmetic surgery on his eyes and a painful round of hair implants. By 2010, Mr. Batista was Brazil's richest man and famous in his own right.
When Rio de Janeiro officials flew to Europe to clinch the city's bid to host the 2016 Olympics, they flew on one of his planes. None of his companies incited more excitement than OGX.
To found it, Mr. Batista assembled top executives from state-controlled oil giant Petroleos Brasileiros SA who investors believed were well suited to select prime oil fields for production. Mr. Batista took to introducing one, former Petrobras exploration chief Paulo Mendonça, as "Dr. Oil."
Mr. Batista now says these executives were expert at finding oil but not producing it. And they weren't familiar with the geology OGX was working with. Worse, he said, they fed him glowing progress reports to persuade him to pay big bonus checks.
"The motivation wasn't necessarily to bring me the truth," he said. Several former OGX oil executives declined to comment for this article. Mr. Mendonça couldn't be reached, and his friends say he has sought to stay out of touch following the company's collapse.
Mr. Batista said he is comfortable passing on the blame to his managers because, as a mining executive, he didn't have the knowledge of the oil industry to question their reports.
"I am the owner of a big group. I alone can't do it. Let's say I can be the owner of a hospital, but without 50 surgeons in their areas you are nothing. I don't have the special knowledge. You wouldn't ask the owner of a hospital to operate on your kidney," he added.
There were some signs of trouble. Before OGX's IPO, investment-bank Merrill Lynch pulled out of the deal after its analyst, Frank McGann, said the expectations were too high. Later in 2010, OGX sought to sell some of its fields to established oil companies that said the prices were too high. Mr. Batista is a believer in luck and superstition, and his lucky number is 63.
During his rise, the fact that he ended all of his oil-field bids with 63 added to his air of charmed success.But his luck seemed to turn in 2012. He was riding high early in the year when he got a $2 billion loan from Abu Dhabi and a $300 million equity investment from General Electric Co.
Then, in March, his son ran over a day laborer, killing him with the Mercedes Mr. Batista kept in his living room. Mr. Batista took to his Twitter account to criticize the man for putting his son's life at risk.
But the Brazilian press was highly critical of Mr. Batista's response and what it suggested about economic inequality in Brazil. Then in June, OGX announced that the wells it had drilled would produce far less than was estimated, prompting a cascade of declining share prices.
"If you look at my astrological map, this period wasn't favorable for me," Mr. Batista said during the interview, pausing and staring into space for a moment.
"The good period? It has already started, literally this month," he added. Mr. Batista predicts he will make a comeback.
Bankers and private-equity investors who have met with him in recent days say he talks incessantly about the story of U.S. entrepreneur Elon Musk, the founder of PayPal, the commercial space travel company SpaceX, and the electric car company Tesla Motors.
During the interview, Mr. Batista brought up Mr. Musk several times as an entrepreneur who was doubted by investors only to prove them wrong.
Mr. Batista believes that he will experience the same triumph when the port, mining and other parts of his conglomerate that he says are healthy become profitable.
"Elon Musk said starting a business is like eating glass," Mr. Batista said. "I am eating glass." Loretta Chao in São Paulo contributed to this article.
yahoo.com
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